The central bank announcement showed that on September 9, 120 billion yuan of reverse repurchase operation was carried out to hedge the impact of MLF expiration and other factors, and 56.5 billion yuan of net liquidity was recovered. Mingming, chief analyst of CITIC Securities Fixed Collection, told First Financial Journalist that the central bank hedged most of the matured funds by reverse repurchase. It can be seen that the central bank was unwilling to continue MLF before and after the benchmark reduction, resulting in a flood of short-term liquidity, and also unwilling to return large amounts before the benchmark landing, leading to a significant disturbance of liquidity level. Move.

Mingming also said that the non-renewal of MLF is actually the continuation of the conventional operation of pre-alignment replacement MLF. Both MLF and alignment are quantitative tools, and there is a certain substitution effect. Replacing MLF with lowering the benchmark to provide longer-term funds can promote the downward trend of bank capital cost, guide the downward trend of LPR and loan interest rate, and achieve the goal of cost reduction.

From the perspective of market liquidity, the short-end interbank interest rate is relatively stable, the long-end interest rate has dropped significantly, the short-end pledge repurchase rate on the Shanghai Stock Exchange is stable, and the long-end rise; Shibor (Shanghai Interbank Offered Rate) has been flat or slightly increased except for the 14-day term interest rate.

(Image source: CITIC Securities)

Specifically, on September 9, DR001 weighted average interest rate rose 1.09bp to 2.6035%, DR007 0.93 BP to 2.6538%, DR014 1.08bp to 2.6763%. For Shibor, overnight varieties were up 1 BP to 2.6070%, 7 days to 2.6520%, 14 days to 2.6610%, 1 month to 2.6880%.

For many industry insiders, the short-term release of funds after the benchmark reduction can ensure that liquidity steadily surmounts the tax peak. After that, although facing such factors as end-of-season regulatory assessment, the downward trend of market interest rate center is worth looking forward to. It is expected that risk-free interest rates will be affected by interbank liquidity easing downward, but the downward space is limited. A state-owned bond trader told reporters.

Jianghai Securities also analyzed that the simple reduction of the markets positive response has been relatively adequate. Whether the late interest rate can continue to decline depends on whether the MLF interest rate and OMO (open market operation) interest rate will fall. If the MLF and OMO interest rates do not fall, the estimated probability of MLF continuation is not large, the amount of funds released is limited, and short-term profits. If the MLF and OMO interest rates fall and the short-end interest rates fall, there is still room for the long-end interest rates to fall.

However, in the long run, the short-end yields of treasury bonds have been almost flat in the past two weeks, while the medium-long-end yields have declined in all respects, while the short-end yields of state-issued bonds have declined and the medium-long-end yields have been almost flat. The traders said there would be 265 billion yuan of MLF and 120 billion yuan of reverse repurchase due next week. If the follow-up MLF does not continue, it may also bring impact to the market.

Will MLF Interest Rate Reduce

In addition, a new issue of LPR (loan market quotation rate) will be released on September 20. If the MLF interest rate is lowered then, it will also drive the LPR down.

Furthermore, there are two effects on liquidity. On the one hand, if the MLF is not renewed at the end of September, the liquidity released by the lowered standard will basically fill the funding gap in September, and the over-reserve rate will continue to maintain at a normal high level of about 1.6%. If the MLF is renewed at the end of September, the over-reserve rate will be pushed up to about 1.9%, considering the follow-up. With the release of 100 billion targeted funds, the over-reserve rate remains at a high level throughout the year, and the short-end interest rate is expected to decline, approaching the capital interest rate from June to July.

As a result, next week will be an important window of observation for monetary policy. We believe that price tools and quantitative tools are not contradictory and can be used. MLF may not be renewed or scaled down on the 17th, and price tools need to be closely monitored. Speak plainly.

However, it is also argued that if MLF interest rates were lowered solely to reduce lending rates, it would deviate from the original intention of using market-oriented reform to promote the reduction of real lending rates. Zhang Xu, chief analyst of Everbright Securities, told First Finance and Economics that under the background that the spread of LPR quotation has not been fully compressed, MLF interest rate should not be lowered at present, so as to better achieve the goal of market-oriented reform.

He explained that although the current one-year LPR is lower than the benchmark lending interest rate for the same period, it is still higher than the 10% discount of the benchmark lending interest rate, but also significantly higher than the one-year short-term lending yield over AAA level. At present, the one-year LPR is 4.25%, and the spread between the one-year MLF interest rate and the one-year MLF interest rate is 95 basis points, while the spread between the one-year MLF interest rate and the historical lowest to 3.0% is only 30 basis points, which shows that there is still much downward space for LPR in the future.

We believe that the gradual reduction of LPR is more conducive to the switching of interest rate pricing system and avoiding excessive impact on credit delivery. In addition, judging from exchange rate, inflation and economic growth, the urgency of reducing MLF interest rate is not high. Zhang Xu said.

This does not mean, however, that MLF rates are not likely to fall. Against the background of the gradual decline in market interest rates, the market is still expecting to reduce MLF interest rates. The main controversy is whether to lower MLF interest rates in September or at the end of the year. If it is downgraded in September, it will be more likely that it will appear on September 17, according to industry analysts.